Sunken Gold Untouched for 157 Years Off U.S. Lures Hunter

Odyssey Marine Exploration Inc. Remotely Operated Vehicle pilots navigate the advanced robotics used to recover silver bars from the SS Gairsoppa shipwreck site in the North Atlantic, in this handout photo on July 2, 2012. For Odyssey, the Central America shipwreck offers another chance to show the potential gains from deep-sea salvaging. Source: Odyssey Marine Exploration via Bloomberg

April 25 (Bloomberg) -- Treasure-hunter Bob Evans has spent
half his life dreaming about the SS Central America, a pre-Civil
War steamship decaying in the lightless depths off South
Carolina. Now he’s returning to the shipwreck after 23 years.

Evans, 60, set out this week with deep-ocean explorer
Odyssey Marine Exploration Inc. to revisit the remains of the
19th-century sidewheel steamer, which sank in 1857 with the loss
of 425 lives and an undetermined amount of gold. Despite
recovery efforts in 1989 through 1991 that netted more than two
tons of the precious metal, Odyssey says there may still be $86
million of gold lying more than a mile below the surface of the
Atlantic.

“This is the greatest lost treasure in United States
history,” Evans, who was chief scientist on the earlier
expeditions, said in a phone interview before the ship sailed.

Even with the plunge in gold last year, the metal is still
more than triple its price in the early 1990s, when previous
recovery efforts were suspended because of legal battles over
rights to the treasure. And the rare coins that have been found
at the site are selling for much more than their weight in gold.

For Odyssey, the Central America shipwreck offers another
chance to show the potential gains from deep-sea salvaging.
While the Tampa-based company had its biggest profit in the
fourth quarter and has recovered tons of treasure in past
projects, some chronicled in the Discovery Channel series
“Treasure Quest,” it’s failed at others and hasn’t posted an
annual profit in eight years.

‘Very Atypical’

Odyssey is a “very atypical company in an atypical
industry,” Mark Argento, a Minneapolis-based analyst at Lake
Street Capital Markets, said by phone. “It’s more like a
biotech company: Not every biotech company gets every drug
approved.”

Odyssey is undeterred. The company cites a court-appointed
expert for its estimate of how much gold may still be at the
wreck site, assuming that the bullion is in the form of 19th-century U.S. coins called Double Eagles.

“Our research department and the court-appointed experts
all believe there is enough gold remaining at the SS Central
America to warrant the expense of conducting an expedition,”
Odyssey President Mark Gordon said last month in an e-mail.

California Gold

In 1857, the quickest way to get from San Francisco to New
York was to take a steamship to Panama, cross the isthmus by
train and then sail up the coast via Havana. The Central
America, which ran the Atlantic leg, was on its 44th round trip
when it sank on Sept. 12 after being caught in a hurricane. Only
about 150 passengers were saved.

The ship was carrying, among other things, a large
consignment of gold for businesses, including ingots and coins,
from California’s Gold Rush, according to the 1998 book “Ship
of Gold in the Deep Blue Sea.”

Based on information in “Ship of Gold” and other
references, there may be an additional cargo, often referred to
as the army-guarded gold. The company wasn’t counting on finding
any of that in its cost calculations, Gordon said on a March 17
earnings conference call.

‘Collapsed Building’

The shipwreck site was located in 1988 by a group led by
explorer Tommy Thompson, who raised financing for and led a
series of expeditions beginning in the 1980s. Evans, a
geologist, began working with Thompson, his former neighbor, in
1983.

“It’s essentially a four-story collapsed building at the
bottom of the sea,” said Evans, who was one of a handful of
people in the ship’s control room who watched the deep-water
discoveries via video transmissions from a camera aboard a
remotely operated robot called Nemo.

Using the robot, which can withstand deep-sea pressures of
4,000 pounds per square inch, the expeditions found gold flakes,
coins and bars over the following three years, according to
Thompson’s 1998 book “America’s Lost Treasure.”

Thompson’s operations were cut short by legal battles,
beginning with lawsuits filed by insurance companies, banks and
underwriters. Thompson’s group eventually successfully defended
the right to 92.5 percent of the artifacts it recovered and the
right as salvor to recover what remained at the wreck.

Arrest Warrant

The salvaged gold was sold in a series of auctions and
private sales. Today, you can bid on a so-called $20 Double
Eagle from the Central America on EBay Inc.’s website priced at
about $11,000.

Still, the legal disputes dragged on when investors didn’t
receive any money from the expeditions, according to Ira Owen
Kane, who was appointed by a court to manage Thompson’s
companies for the benefit of the investors and their creditors.

An arrest warrant was issued for Thompson in August 2012
after he failed to appear at a hearing before U.S. District
Court Judge Edmund A. Sargus.

Avonte Campinha-Bacote, a lawyer in Columbus, Ohio, who
represented Thompson from 2012 to 2013, said he was unable to
provide current contact details for Thompson.

‘Incredibly Unlikely’

Odyssey, which was selected for the Central America project
by Kane, said it will receive 80 percent of recovery proceeds
until a fixed fee and a negotiated day rate are paid, without
disclosing those amounts. After that, Odyssey will receive 45
percent of the proceeds.

Meson Capital’s Morris said in a March phone interview he
believes Thompson probably would have tried to retrieve any
remaining gold “if there was really stuff worth finding.”

Odyssey discounts the possibility that anyone has been able
to access the site since 1991.

One of many impediments is the depth of the wreck, Odyssey
said. Though not as deep as the RMS Titanic, discovered in about
12,500 feet (3,810 meters) of water, Odyssey said the site of
Central America at about 7,200 feet would make it inaccessible
to most groups.

An expert retained by the court estimated that the gold
remaining on the ship was probably worth $343,000 to $1.37
million in 1857, according to Odyssey. Using the low end of the
estimate, there would be at least 17,150 coins still at the site
if the gold was in the form of Double Eagles, Gordon said March
17.

Using a conservative average price per coin of $5,000, the
potential cargo would now have a value of $85.8 million, Gordon
said, in what he described as a hypothetical exercise. The value
would be reduced if some of the bullion is in ingots, bars or
gold dust. Gold for immediate delivery rose 0.7 percent to
$1,302.55 an ounce at 9:16 p.m. in London.

Evans, who will represent the original investors and act as
a scientific adviser, says he’s sure the Odyssey expedition will
more than pay for itself -- though he won’t be more specific.

“I publish and I teach about what we did recover and the
history of the site,” Evans said. “But all along I’ve known
what it still holds.”